Texaco, Inc. v. Brown

VAUGHN, Judge. The essence of this case may be stated as follows: Defendants allege that plaintiff obtained defendants’ obligations on the original agreements by fraudulent representations. (We assume, without so deciding, that defendants have properly pleaded fraud with respect to the original contracts.) Plaintiff denies that there was any fraud in connection with those agreements. Absent the settlement agreement, defendants would have been at liberty to defend, on the grounds of fraud, any action brought by plaintiff and to assert their claim for damages resulting from plaintiff’s fraud. Plaintiff would have had the opportunity to refute those allegations. The parties did not elect to litigate. Instead, with full knowledge of all material facts, the parties elected to compromise. The “Settlement Agreement” was executed on 27 July 1973. It made specific reference to each of the earlier agreements entered into by the parties. The agreement continued: “. . . Whereas, the parties hereto desire to reach a mutually satisfactory and beneficial settlement of all their mutual rights and obligations, Now, Therefore, in consideration of the mutual promises, covenants, and conditions set forth herein, and for other good and valuable consideration, the parties agree as follows. . . .” The foregoing declaration of the intentions of the parties was followed by a detailed recital of the new rights to obligations of the parties arising from the “Settlement Agreement.” Defendants, well before they executed the settlement agreement, had knowledge of all matters they now assert in their effort to avoid their obligations arising from the settlement agreement. An essential element of actionable fraud is, therefore, missing. That element is that a party to whom the alleged false and fraudulent representation is made must reasonably rely thereon and be deceived to his injury. Products Corporation v. Chestnutt, 252 N.C. 269, 113 S.E. 2d 587. Defendants do not even allege that at the time they executed the settlement agreement, they were relying on false representations of defendants as an inducement to execute the agreement. The settlement agreement, executed for the parties’ stated purpose of bringing about “a mutually satisfactory and bene [742] ficial settlement of all their mutual rights and obligations,” bars any right to recover on any claims arising out of the antecedent contracts. The judgment is affirmed. Affirmed. Judges Hedrick and Clark concur.